Community-based small businesses across Africa struggle to access credit to boost their businesses. The other side of the coin is that their retail clients also seek credit facilities. This leaves small businesses such as retail shops in a conundrum. How can they extend credit that they do not have?

Paylend Africa, a Nairobi-based payments platform, seeks to help small-scale retailers access the credit they need to scale their businesses. Their growth is always hampered by illiquid legacy financing systems which lead them into debts.

“There are these retail shops that serve families in the neighborhoods,” Eliutherius Juma, the founder and CEO of Paylend Africa says. “But at the end of the day, ten years down the line, they’re still in the same state.”

These MSMEs (micro, small & medium enterprises) are critical players in the economic infrastructure of the most African countries. A study by AFI Global states that “MSMEs contribute on average more than 50% of employment and 40% of GDP and contribute significantly to poverty reduction.”

The report acknowledges that there have been significant improvements in the MSMEs funding. However, more needs to be done to ensure these small businesses thrive.

Backed by a seed round of $2 million, Paylend Africa launched a credit programme for small businesses in 2022. Termed Inua Biashara (means ‘boosting businesses’ in Swahili), MSMEs can access credit of up to $1,600 to replenish their stock.

“Today we have gained at least 5,000 micro and small enterprises,” Juma told Nodo News. “We’ve also gained 20,000 consumers to date.”

Paylend Works Within a Community

At the core of Paylend’s service is the community – its major source of inspiration. Both the buyers in the community and retailers are hosted on the same platform. Consumers can see which shops offer credit facilities from the platform.

Juma explains that retailers would extend credit to their consumers, which Paylend would finance. The buyer would then pay Paylend within an agreed time. This ensures retailers don’t feel the pinch of extending credit to their customers.

On the other hand, retailers can receive credit for stock. This double-edged sword ensures liquidity for the MSMEs.

“We can collect data on the transaction between them and their consumers,” Juma mentions. “So, we have an upper hand in terms of scoring them and understanding their business.”

The data also helps the startup to assess how much credit they can extend to these shops and also individuals.

The Future is Crypto

Paylend Africa is seeking to go beyond the Kenyan borders. In its expansion plans, the company is crafting a cryptocurrency approach to lower transaction fees.

“We are looking at a way we can ride on crypto and blockchain to reduce the cost of transactions,” Juma asserts. He adds that with cryptocurrency, the firm can be truly a Pan-African entity without hindrances of fiat currencies.

Already, small retail trades in Sub-Saharan Africa are fueling the adoption of cryptocurrencies, according to Chainalysis report, published in Sep. 2022.

“Retail-sized transfers below $10,000 make up 6.4% of its transaction volume, more than any other region,” the report denoted. “The role of retail becomes even more apparent when we look at the number of individual transfers.” Retail transfers make up 95% of all transfers. Transfers under $1,000 take up 80% of crypto trade volumes, more than any other region.

-Edited by Faustine Ngila